2019 (10) TMI 1617 - AT - Income Tax

ITAT Rules Interest Under Section 244A Was Miscalculated, Orders Proper Adjustment of Refund

M/s Indian Aluminium Co. Ltd., Versus The DCIT, Central Ciricle - 1 (4), Mumbai

M/s Indian Aluminium Co. Ltd., Versus The DCIT, Central Ciricle - 1 (4), Mumbai - TMI 1. ISSUES PRESENTED and CONSIDERED Whether the Assessing Officer (AO) committed a mistake apparent from the record by not properly computing interest under section 244A of the Income Tax Act, 1961, and not adjusting the interest due with the refund granted. Whether the Commissioner of Income Tax (Appeals) [CIT(A)] erred in dismissing the assessee's appeal against the rejection of the rectification application filed under section 154 of the Act. Whether the method of calculation of interest under section 244A requires that the refund granted should first be adjusted against the interest amount due to the assessee, as per judicial precedents. Whether the department unlawfully withheld refund or interest, thereby entitling the assessee to interest on the outstanding amount. Whether the issue is covered by the Tribunal's earlier decisions in the assessee's own case for other assessment years and whether the CIT(A) erred in passing the order without affording opportunity to submit working details. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Existence of Mistake Apparent from Record in Interest Computation and Adjustment under Section 154 Legal Framework and Precedents: Section 154 of the Income Tax Act permits rectification of any mistake apparent from the record. Section 244A mandates payment of interest on refunds due to the assessee. The computation and adjustment of interest and refund amounts must comply with the statutory provisions and judicial interpretations. Court's Interpretation and Reasoning: The AO rejected the rectification application on the ground that no mistake apparent from the record existed. The CIT(A) upheld this rejection, dismissing the appeal. However, the Tribunal noted that the AO and CIT(A) failed to consider the proper method of interest computation and adjustment as mandated by law and judicial precedents. Key Evidence and Findings: The assessee pointed out that interest under section 244A was not computed correctly and the refund was not adjusted first against the interest due. The Tribunal referred to the coordinate Bench's decisions in the assessee's own cases for other assessment years where similar issues were decided in favor of the assessee. Application of Law to Facts: The Tribunal found that the AO's and CIT(A)'s approach was contrary to established principles and judicial rulings, indicating a mistake apparent from the record that warranted rectification under section 154. Treatment of Competing Arguments: The Revenue admitted the Tribunal's earlier directions but supported the concurrent findings below. The Tribunal gave precedence to the coordinate Bench's decisions and authoritative judicial pronouncements. Conclusion: The Tribunal held that the rejection of the rectification application was erroneous and that the interest computation and refund adjustment must be rectified in line with judicial principles. Issue 2: Proper Method of Calculation of Interest under Section 244A and Adjustment of Refund Legal Framework and Precedents: Section 244A provides for simple interest on refunds due and payable to the assessee. The Hon'ble Delhi High Court in India Trade Promotion Organisation vs. CIT and the Supreme Court in R.E.G. Ltd. clarified that the interest calculation includes interest on the outstanding refund amount, including interest accrued but unpaid. The Explanation to section 140A(1) and provisions relating to interest under sections 220(2), 234B, and 234C were also considered analogous. Court's Interpretation and Reasoning: The Tribunal extensively quoted the Delhi High Court's analysis, emphasizing that the term 'any amount' in section 244A is broad and includes interest components. When the Revenue pays only part of the refund, interest must be paid on the balance outstanding amount, which may include principal and interest components. The Tribunal rejected the notion that this amounts to interest on interest, clarifying that the interest payable on the refunded amount is quantified and interest under section 244A applies only on the unpaid balance. Key Evidence and Findings: The Tribunal relied on the detailed judicial reasoning that the Revenue cannot avoid paying interest on unpaid portions of the refund, including interest elements, and that partial payments do not absolve the Revenue from further interest liability. Application of Law to Facts: The Tribunal directed the AO to adjust the refund in accordance with these principles, ensuring that the assessee receives the full amount due including interest as per section 244A. Treatment of Competing Arguments: The Revenue's contention supporting the lower authorities' findings was overruled in favor of the binding judicial precedents and coordinate Bench decisions. Conclusion: The Tribunal held that the refund adjustment and interest computation must follow the principles laid down by the Delhi High Court and Supreme Court, mandating interest payment on unpaid refund amounts. Issue 3: Allegation of Unlawful Withholding of Refund or Interest by the Department Legal Framework and Precedents: The entitlement to interest under section 244A arises when the Revenue fails to pay the refund amount within the stipulated time, effectively withholding the refund or interest unlawfully. Court's Interpretation and Reasoning: The CIT(A) observed that the assessee did not demonstrate unlawful withholding of refund or interest. However, the Tribunal noted that the assessee had computed interest as per the Delhi High Court's decision, establishing that part payment by the Revenue triggers interest liability on the unpaid amount. Key Evidence and Findings: The assessee's calculation of interest and reliance on judicial pronouncements constituted sufficient demonstration of the Revenue's default in paying the full refund and interest. Application of Law to Facts: The Tribunal found that the Revenue's partial payment amounted to withholding of refund and interest, attracting interest liability under section 244A. Treatment of Competing Arguments: The Tribunal did not accept the CIT(A)'s reasoning ignoring the assessee's calculations and judicial support. Conclusion: The Tribunal concluded that the Revenue unlawfully withheld refund and interest, thereby entitling the assessee to interest on the outstanding amount. Issue 4: Applicability of Coordinate Bench Decisions and Procedural Fairness Legal Framework and Precedents: Principles of consistency and judicial discipline require following coordinate Bench decisions on identical issues. Procedural fairness mandates affording opportunity to parties to submit relevant working and arguments. Court's Interpretation and Reasoning: The Tribunal noted that the issue was already decided in the assessee's own appeals for assessment years 1996-97, 2000-01, and 2001-02 by coordinate Benches, directing refund adjustment in line with the Delhi High Court's ruling. The CIT(A) passed the impugned order without affording opportunity to the assessee to submit working details. Key Evidence and Findings: The Tribunal relied on the coordinate Bench's orders and the absence of procedural opportunity granted by the CIT(A). Application of Law to Facts: The Tribunal applied the principle of judicial consistency and procedural fairness, holding that the CIT(A)'s order was not sustainable. Treatment of Competing Arguments: The Revenue's support of the lower authorities' findings was set aside in light of the coordinate Bench decisions and procedural lapses. Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the CIT(A)'s order, and directed the AO to adjust the refund as per the established principles.